Doyon hoist fails

Cambior (CBJ-T) reports that the production hoist at its Doyon mine, 40 km east of Rouyn-Noranda, Que. broke down over the weekend and may result in the temporary layoff of staff during an estimated 2-6 weeks of repairs.

The company is currently dismantling the hoist to evaluate potential damage to the bearings and the central shaft as well as the impact on production.

Cambior still expects the 3,500-tonne-per-day Doyon mill to run at full capacity by processing 1,600 tonnes per day from the Mouska and Doyon underground mines plus 2,000 tonnes per day from the low-grade (1 gram gold per tonne) surface stockpile.

Cambior said it would use Doyon’s service hoist to raise ore to the surface and supplement this by trucking ore to the surface via Doyon ramp system.

The company has contacted its insurers about the incident.

During 2002, the Doyon division, which comprises the Doyon and Mouska mines, poured 216,200 oz. of gold, down from 228,700 oz. in 2001. Some 50,900 of those ounces came in the fourth quarter, down from 62,000 oz. a year earlier, as mill throughput slipped 10% thanks to a harder mix of lower-grade underground ore.

Doyon is expected to produce 218,000 oz. at a higher mine operating cost of US$241per oz. in 2003. The higher costs reflect development for stope preparation.

On a brighter note, recent exploration east of the Doyon shaft uncovered a new high-grade zone dubbed J zone. The company also extended at depth existing mineralized lenses at all of its Canadian gold operations on US$ 9.2 million worth of exploration. The company also spent US$4.2 million on offsite exploration. The company is considering mine deepening programs at the Sleeping Giant (also in Quebec) and Mouska mines.

Cambior recently posted net earnings of US$1.5 million (or a penny per share) for the last three months of 2002, as production slipped and the company continued to trim its hedge book (T.N.M. Jan. 20-26/03). A year-earlier, Cambior turned in net earnings of US$12.1 million (12 per share). Revenue between the two periods climbed by US$1 million to US$53.4 million. Cash flow from operations more than doubled to US$12.5 million.

For all of 2002, Cambior piled up a net loss of US$8.1 million (6 per share), a shade better than the US$8.2 million (9 per share) it lost in 2001. The 2002 loss includes a negative non-hedge derivative adjustment and other charges totalling US$17.3 million. Revenue climbed to US$204.2 million from $198.2 million. Cash flow plummeted by more than US$50 million to US$30.8 million.

During 2002, Cambior trimmed its hedging commitments by 600,000 oz. of gold or 32% by delivering in to existing positions, the restructuring of certain obligations and by repurchase other positions. At year end, the company’s hedge commitments totalled 1.3 million oz. at an average price of US$301 per oz., including 114,000 oz. of call options sold at an average of US$301 per oz. The hedge book represents 31% of Cambior’s reserves.

Looking ahead, the company plans to reduce it hedge position a further 37% to 800,000 oz. or 20% of reserves — the minimum allowed under the new credit facility arranged for the Rosebel project in Suriname – by the end of 2003.

Cambior plans to use $5 million from the $17.1 million received from the recent exercise of more than 10 million warrants to reduce its indebtedness under the new credit facility. Each warrant allowed the holder to buy one Cambior share for $1.70. Cambior currently has about 170.3 million outstanding shares.

Cambior reiterated its 2003 production estimate of 522,000 oz. of gold at a mine operating cost of US$227 per ounce for all of 2003. The unit cost includes a non-cash charge of US$9 per oz. for deferred stripping capitalized in prior years.

At the end of 2002, Cambior had US$42.8 million in cash and equivalents. Shareholder equity was US$162.6 million; long-term debt was just short of US$28 million.